EU leaders shine spotlight on Amazon, Google over tax policy

European leaders were scheduled to discuss how to combat aggressive tax avoidance by major companies such as Amazon, Google and Apple at a summit on Wednesday, and cut an estimated €1 trillion a year that the EU is losing to tax evasion or avoidance.

The four-hour summit was originally called to discuss energy policy, but investigations in Britain, France and the US exposing how little tax major international companies such as Amazon and Google have been paying by carefully structuring their European operations has forced the issue to the top of the agenda.

“We have got to make sure as we set those tax rates that companies pay taxes, and that means international collaboration, the sharing of tax information,” said British Prime Minister David Cameron as he arrived at the summit.

Cameron has put tax policy on the agenda of the G8 meeting taking place next month in Ireland.

It may be recalled that British telecom major Vodafone has been in the news for routing its investment in Hutchison Essar in India through Mauritius, avoiding payment of as much as Rs. 11,200 crore in taxes. India is in the process of reworking its laws to bring such transactions under the tax ambit.

A US investigation revealed on Monday that Apple had paid just 2% tax on $74 billion in overseas income, largely by exploiting a loophole in Ireland’s tax code.

That followed reports that the British unit of Amazon paid just $3.7 million tax on 2012 sales of $6.5 billion, and similar revelations concerning the UK operations of Google and Starbucks.

“A lot of these revenues are not getting taxed,” said a French diplomat briefing reporters ahead of the summit. “We need to find a way of bringing home the tax on these activities.”